equity investment opportunity settlement through nclt

everything begins with a concept…

EQUITY INVESTMENT OPPORTUNITY Settlement through NCLT.

BSE and NSE Listed 45 Years Old Business GEI INDUSTRIAL SYSTEMS LIMITED

by

Concept Management Consulting Limited 1

Strictly Private & Confidential. Not for Circulation 27 October 2018

Table of Contents

2

Concept Management Consulting Limited

SR. NO. SECTION PAGE #

1. History & Business Overview 3

2. Reasons for Stress 8

3. Market Competition & Potential 11

4. Revival Strategy 17

5. Financial Overview 20

6. Investment Opportunity 24

3


HISTORY & BUSINESS OVERVIEW

4


Background of Company

GEI Industrial Systems Limited (GEI), established in 1970, is listed on BSE, NSE

since 1994

GEI is innovation driven & it specializes in design, manufacture, fabrication,

testing, erection & commissioning of air cooled heat exchangers for Oil & Gas

industry with limited domestic competition

100% subsidiary GEI Power Limited, established in 2009, has designed &

manufactures air cooled vacuum steam condensers

Both GEI & GEI Power have eco-friendly substitutes saving on water

GEI at its peak commanded Market-cap of ~Rs. 500 Crores ,Topline of Rs. 358

Crores & EBITDA of Rs. 64 Crores, (2011)

Promoter C. E. Fernandes, a man of highest integrity brings 45 years

impeccable record with Customers and Banks.

GEI is victim of stress in the Power Sector - cascading effect of cancellation of

coal allocation in 2012.

Present proposal is under operational leadership of GEI Founder & a Team of Experts.

Key Customers

DOMESTIC MARKET BHEL IOCL BPCL, HPCL ONGC GAIL Nuclear Power Corporation of India Engineers India Limited Larsen & Tubro Reliance Petroleum Limited Ultratech Cements Shree Cement Limited TOYO Engineering India Ltd.

INTERNATIONAL MARKET General Electric, USA Siemens, Germany Atlas Copco, USA Petroleum Development Organisation, Oman Kuwait national Petroleum Corporation, Kuwait

5


2009-10 Air cooled vacuum steam Condenser capacity taken to

150 MW X 4 for Shri Cement & Indo Bharat thermal power station

products for BHEL Cooled Heat Water Modules to Pressure Air Cooled facility for multipl

Exchangers for Hydro Brazil, France & USA Heat Exchangers for engineering

Carbon Sector for General Electric ONGC Offshore platform products under

100% Subsidiary

1980-85

1993-95

2003

2006-07 Started Engineers India Installed first ACSC Largest Air Cooled

manufacturing of approves Fin Fan in Cement Industry, Steam Condenser various types of Cooler for Crude Oil Air Heaters in LNG for 80 MW power

Finned tubes Refinery & Conversion & plant in Chennai & OFAF Coolers for

Transformers High Pressure driven

Compressor Coolers for ONGC

Process Gas Coolers for Turbo-

Compressor Package for ONGC Offshore

Platform

Journey in Product Innovations & Market Expansion

1970-80 GEI was developing import-substitute

1990 Commenced

manufacturing of Air

2001 Export of Gas

Turbine Cooling

2006 Installed Duplex

Stainless Steel High

2009 Established a state of the art 27 acres

e

2011-12 Tied up with

Innospin AG of Switzerland to offer

Air Cooled Steam Condensers beyond

300 MW capacity.

2012-15 100% of Air Cooler

requirement for IOCL Paradeep Refinery was

catered in 2011-12 with a repeat order in

2014-15

Cancellation of Coal Blocks by Supreme Court in 2012 led to Power Project Builders not lifting equipment & failing to pay for delivered equipment - GEI referred to NCLT in Aug 2017 by an Operational Creditor

6


Shareholder Value Curve

20 11

1993/1997

2007/2011 Reached peak Revenue, EBITDA & Market Cap of Rs. 385 Crores, Rs. 64 Crores & ~ Rs. 500 Crores, respectively

3 PE Funds Infused Rs. 7 Cr, 10 Cr and Rs. 62.5 Cr at prices ranging from Rs 70 to 250 per share

Promoters also infused Rs. 3.67 Cr at Rs. 56 per share and Rs.12.50 Cr at Rs.250 per share.

1970/ 1974/

1981

Brought IPO, raised Rs. 6 Cr at a price of Rs. 20 /share

Hamon Industries Thermique –Belgium invests Rs. 6 Cr at Rs 20 per share & further HNI investors infused Rs. 2 Cr

Mr. Fernandes sets a proprietorship firm with Rs. 10,000 in 200 sq. ft. rented premises in Bhopal

Shifted to a 1800 sq. ft. owned premises on plot of 20000 sq. ft.

GEI’s plant is spread over 6.6 acres of land in Govindpura, Bhopal

7


Products & their Applications

Product Sector Application Product Application

Fin Fan Products

Hydrocarbon

• Natural gas compression processing and transportation

• Crude Oil refining & petrochemical product • LNG re-gasification terminals • Petrochemicals

Air Cooled Heat Transfer

Products

Power

For OEM’s who manufacture • Transformers • Steam Turbines • Gas Turbine • Gas & Diesel Engines

Skids & Engineered Packages

Oil & Gas Projects • Gas Conditioning Skids • Chemical Injection Skids

EPC Projects

Nuclear Power Plants

• Waste Management & heavy Water Upgradation Project

• Cooling Systems for Reactor Buildings

GEI an Innovative Engineering Manufacturer & capable to cater to wide-range of tailored engineering products for defence, automobile, general engineering etc.

8


REASONS FOR STRESS

9


Factors Leading Company to NCLT

In 2012, Coal Scam broke out - receivables & orders from Power Generating Companies severely impacted

RBI restricted exposure of banks to coal-based Power Generators leading to delinquencies in receivables of ~Rs. 100 Crores

leading to LC devolvement of ~Rs. 40 Crores & Bank Limits turning NPA in December 2014

Bank Guarantee of ~ Rs. 60 Crores were en-cashed by customers leading to bank debt swelling to over Rs. 200 Crores in FY 2014-15

Despite 40 years of impeccable track-record, banks withdrew support resulting in GEI failing to execute orders – eventually

order filling & flow completely dried-up

Operations continued

until December 2015-

with working capital

totally dried-up, GEI

failed to execute orders

on hand and the

operations came to

standstill leading to

admission into NCLT in

2017

10


Key Dates in NCLT

Date Court Proceedings / Developments in Hearing Key Outcome(s) in Court

Hearing

20-7-2017 Case Admitted IRP appointed, on August 2, 2017

08.09.2017 Resolution Professional Confirmed Mr. Naveen Sood

RP recommended for Liquidation as Resolution Plan submitted ICICI Bank recommended to RP to convene a COC meeting on

20-4-2018 could not be discussed with COC as 270 days period exceeded & no April 13, 2018 but instead, RP filed the closing Report on further extension sought by RP April 20,2018 recommending Liquidation

On the basis of modification of Sec 29 A of IBC Code, Promoter has 10-6-2018 requested NCLT to grant 2 months time for submission of Next date of hearing on April 08, 2019

Resolution Plan by him

7-9-2018 Some more claims submitted by other Creditors like Nuclear As court has to study these fresh claims, hence Next date of Power Corporation & Commissioner Public Provident Fund hearing fixed for April 08,2019

09.10.2018 Case hearing adjourned Next date is April 08,2019

11


MARKET COMPETITION AND POTENTIAL

12


Competition - Air Cooled Heat Exchangers for Oil & Gas Sector

GEI BGR Patel Air Temp Paharpur

Largest Second Largest Small Third

About 5 Alloys Three Alloys Nil Nil

Maximum Lesser Minimum Lesser

13 2 Nil Nil

2 1 Nil Nil

40 Units No reference No reference No reference

Competitor

Manufacturing Capacity

Special Alloys

Installations & References

Offshore References

Air Heaters for LNG Terminals

High Pressure Coolers >= 150 bar

Source: Grand Thornton Report

Competition- Air Cooled Steam Condensers for Steam Turbines

13


Competitor

GEI

BGR

Patel Air Temp

Paharpur

Operating References in India

125

50

Nil

50

Largest Operating Unit – India

150 MW

65 MW

Nil

Nil

Principals/Technology Provider Innospin

Switzerland

GEA Germany

Nil

SPX USA

Principal’s References

Less References Maximum

References

Not Available

Second best

Largest Reference of Principal

800 MW

800 MW

Nil

800 MW

Manufacturing Capacity

Largest

Second

Nil

Medium

Source: Grand Thornton Report

14


Order Book Plan for next 5 years

Sr No.

Industry Segment

Products

Type

FY 2020

FY2021

FY2022

FY2023

FY2024

1 Oil & Gas (Exploration & Production) Process Gas Coolers ACHE 5.25 10.63 29.46 41.36 71.43

2 Liquefied Natural Gas (LNG) Ambient Air Heaters AAHR 35.00 53.13 42.72 62.87 35.71

3 Petroleum Refining & Petrochemicals Air Fin Coolers ACHE 17.50 42.50 55.98 74.45 111.43

4 Power Generation- Thermal & Gas Based Air Cooled Steam Condensers (Upto 80 MW) ACSC 11.67 19.13 30.94 62.87 54.29

5 Power Generation- Thermal & Gas Based Cooling Water Modules, Air Blast Oil Coolers ACHE 0.23 2.13 1.47 3.31 1.43

6 Power Generation- Nuclear Power F M Vault Coolers, Pump Room Coolers, WMP & UGP WCHE - - 44.20 33.09 21.43

7 Steel Making Compressed Air Coolers WCHE 0.35 - 1.47 3.31 4.29

Total Expected Order Book for GEI 70.00 127.50 206.25 281.25 300.00

Notes

ACHE Air Cooled Heat Exchangers

AAHR Ambient Air Heater

ACSC Air Cooled Vacuum Steam Condensers

WCHE Water Cooled Heat Exchanger

Market share of GEI is filled by small players & imports Customers will return to GEI due to proven & dependable track-record

Basis for order book continued on next page…..

Basis for Order Book – continued

15


1

Process Gas Coolers Enquiries in hand from export to Middle East from Exterrain, GPS & Other Compressor Packagers supplying for the NG sector

Enquiries under discussions with L&T Mumbai for Oil & Gas Proejcts of ONGC namley Neelam Project

2

Ambient Air Heaters New LNG Terminals being set up at Chchara Gujarat by Shaporjee-Pallonjee , LNG Projects at Mangalore & Ennore are under development

Other LNG Terminals coming up at Ganagavaram,Mundra, Kakinada & Paradip

3

Air Fin Coolers

Refineries of Numaligarh, HPCL Vizag & BPC Kochi are going for major expansion by doubling the capacities. Tenders are already out

11 Refineries of IOCL going for fuel upgradation projects from Bharat-IV to Bharat VI. Tenders under preparation.

New grass root refinery is being set up at Barmer, Rajasthan jointly by the state Government & HPCL.

All the above projects have alrready been ordered on Engineers India Ltd.

4

Air Cooled Vacuum Steam Condensers

Requirements from Ultratech Cements for ACC units based on waste heat recovery at their cement plants for captive generation inlcuding those taken over from Jaypee

Captive Power Plants at Steel Plants

ACC units for export to Middle East forGas-Thermal Based Combined Cycle Power Plants

Process Steam Condensers for Ehanced Oil & Gas Recovery from old fields- Brown Field Projects

5 Cooling Water Modules, Air Blast Oil Coolers Export to Middle East, Africa & South East Asia through orders from Gas Turbine majors like GE,Siemens and Engine mfrs like Rolls Royce,MAN, Warstila, Caterpiller..

6 F M Vault & PR Coolers, WMP & UGP 10 Projects cleared by the Govt. Soon to be set up are Kundamkulam, Jitapur,Klapakkam & Westinghouse (AP)

7 Compressed Air Coolers GEI approved by Supply Chain of Siemens Duisberg and Atlas Copco Koln. Continous requirements for global & indigenious projects for Steel & Fertilizers industries

Team - Potential Stakeholders in the Equity

16


Engineering Capabilities 1.Product Design & Development 2.Production

Engineering Capabilities

Growth & Value

Maximising Strategy

Financial Management

Expertise

Sales & Marketing

C.E Fernandes will drive these functions & will also groom younger talent in these areas with a focus on development of new products

Financial Management & Growth Strategy Anoop Gupta brings 36 years experience as a banker, entrepreneur and strategist having built & turned around businesses in India & overseas – he will lead core finance and strategy functions

Marketing Management 1.Existing Products & Customers 2.New Products & New Overseas Markets Anuj brings 20 years experience across India and Africa in leading businesses apart from 12 years with Indian Air Force (NDA pass- out). He could be the CEO to assist C.E. Fernandes

17


REVIVAL STRATEGY

Claims with NCLT & Proposed Settlement & Fund Raising

18


Name of the Creditors Total claim Payment in

lodged Liquidation

Sr.No Requirement of Funds Amount

1 Payment to Secured Lenders1 35.30

Secured Financial Creditors ICICI Bank Ltd. 49.34 3.24 Yes Bank 19.43 1.28 Axis Bank 46.95 3.08 IDBI Bank 76.08 4.99 SBI 43.84 2.88 Kotak Mahindra Bank 10.32 0.68 Kotak Mahindra Prime Limited – Car Loan 0.01 0.00 Standard Chartered Bank 20.20 1.33 Madhya Pradesh Financial Corporation 0.31 0.02 LIC of India 1.40 0.09 ICICI Bank Car Loan 0.08 0.01 HDFC Bank – Car Loan 0.22 0.01 L&T Finance Ltd. 0.66 0.04

2 Payment to Unsecured Financial Creditors1

7.95 3 Payment to Other Creditors 5.29 1

4 Working Capital Margin 10.00

5 Start-up Expenses 3.50

Total 62.04

Sr.No Proposed Means Amount

1 Fresh Equity – from new investor 25.00

2 Secured Borrowings (Deferred Payment )2 23.54

3 Subordinated Debt3 13.50

Total 62.04 Sub-total 268.84 17.65 Unsecured Financial Creditors - Sub-total 121.14 7.95

Other Financial Creditors (ICDs) - Sub-total 13.63 0.89

Operational Creditors - Sub-total 2.98 0.20 Statutory Dues- Sub-total 25.35 1.66 Dues of Employees - Sub-total 25.08 1.65

Notes: 1. Total proposed payment of Rs. 48.54 Cr to Creditors comprising of

upfront payment of Rs. 11.50 Crores, senior secured debt of Rs. 23.54 Cr (5% ROI & 3 years term) subordinate debt of Rs. 13.50 Cr (15% IRR & 5 years maturity).

2. Senior debt to be serviced out of operational surplus of first 3 years. Grand Total 457.02 30.00

19


Proposed Settlement - Value of Assets

Sr.No. Company Assets Current Value

(In Rs. )

Total Debt & Equity

(Post Settlement Net Enterprise Value

1

Land

26,00,00,000

Debt

23,54,00,000

2

Building

15,00,00,000 Subordinated

Debt

13,50,00,000

3

Plant & Machinery

28,00,00,000

Equity

25,00,00,000

4

Current Assets

40,00,00,000

Total

1,09,00,00,000

Value for Equity

Investor

71,96,00,000

Equity of Rs. 25 Cr against Assets of Rs. 109 Cr makes it a Value Proposition on day one

20


FINANCIAL OVERVIEW

21


GEI – Forecasted Financials – Next 5 Years

Particulars 31-Mar-20 31-Mar-21 31-Mar-22 31-Mar-23 31-Mar-24 New Orders Procured 70.00 127.50 206.25 281.25 300.00

Unfilled order value at the end of year 35.75 89.38 134.06 178.75 178.75

INCOME Sales 34.25 73.88 161.56 236.56 300.00

Other Income - - - - -

Total Revenue 34.25 73.88 161.56 236.56 300.00

EXPENDITURE

Cost of material consumed 39.60 72.10 120.38 166.63 186.00 Other Expenses 7.13 14.06 23.75 33.75 40.00

Cost of Production 46.73 86.16 144.13 200.38 226.00

Add: Opening WIP - 17.96 43.54 61.65 77.50

Sub-total 46.73 104.12 187.67 262.02 303.50

Less: Closing WIP 17.96 43.54 61.65 77.50 69.50 Sub-total 28.77 60.58 126.02 184.52 234.00

EBITDA 5.48 13.30 35.54 52.04 66.00

EBITDA Margin 16% 18% 22% 22% 22%

Depreciation 2.46 2.34 2.22 2.11 2.00

Amortization of Start-up expenses 0.70 0.70 0.70 0.70 - EBIT 2.32 10.26 32.62 49.23 64.00

Interest 2.14 3.92 5.21 6.11 6.06

PBT 0.18 6.34 27.41 43.12 57.94 PAT 0.18 5.17 22.34 32.34 40.56

*The repayment of subordinate debt is not factored since the same will be retired by funds from public offerings in 4th or 5th year

Past Key Financials

22


Particulars

FY 08-09

FY 09-10

FY 10-11

FY 11-12

FY 12-13

FY 13-14

FY 14-15

Gross Revenues 214.54 242.18 385.33 364.5 166.89 69.37 30.57

EBITDA 30.22 35.17 64.18 42.22 (11.91) (14.62) (9.20)

%Margin 14.09% 14.52% 16.66% 11.58% -7.14% -21.08% -30.09%

PBT 17.14 20.78 38.09 2.07 (51.80) (50.24) (32.41)

%Margin 8.00% 8.60% 9.90% 0.60% -31.00% -72.40% -106.00%

PAT 22.87 14.28 24.39 0.11 (48.42) (50.24) (32.41)

Net Cash Available 24.68 16.6 26.78 2.66 (45.42) (46.25) (25.83)

Working Capital Requirement – Next 5 Years

23


Particulars 31/03/2020 31/03/2021 31/03/2022 31/03/2023 31/03/2024

Fund Based

Cash Credit 2.50 12.00 13.00 11.00 -

Bill Discounting 7.03 10.90 18.46 25.49 28.13

Total FBWC 9.53 22.90 31.46 36.49 28.13

Non-fund based

Letter of Credit 12.33 29.88 43.42 57.89 57.89

Bank Guarantee 11.50 34.83 52.92 71.25 80.42

Total NFBWC 23.83 64.71 96.34 129.14 138.31

Total WC Requirement 33.36 87.61 127.79 165.63 166.43

WC Margin 4.77 7.43 5.30 4.54 -

Source of Margin

Equity Infusion 4.77 5.23 - - -

Internal Accruals - 2.20 5.30 4.54 -

24


Gist of Investment Opportunity

Investment- 2019 Exit - 2021

• Equity Infusion of Rs. 25 Crores for controlling stake

• Pre-leveraged deal with 37 Crores Soft Debt

• BSE & NSE listed – Liquid Investment with significant upside potential

• Proven track-record of product innovation, engineering capabilities being reinforced with financial management expertise

• Projected PAT Rs. 22.24 Cr in Mar 22, GEI Marketcap may easily exceed ~Rs. 200 Cr by Sept 2021

• Investor Exit possibility through Strategic acquisition by Overseas Strategic partner (list of potential investors provided in next slide)

Potential Overseas Investors – In-house Expertise

25


Potential Overseas Investors 1. AIR FINS LIMITED, UK 2. AIRCOFIN BV, NETHERLANDS 3. ALFA LAVAL CORPORATE AB SWEDEN/ OLMI SPA ITALY 4. BABCOCK & WILCOX SPIG,ITALY 5. BELLELI ENGINEERING SRL, ITALY 6. BEMBANA CONSTRUZIONI INDUSTRIALI, ITALY 7. BORSIG GROUP, GERMANY 8. BRONSWERK HEAT TRANSFER BV, NETHERLANDS 9. CHARLES THOMPSON, UK 10. HEAT TRANSFER EQUIPMENT, TULSA OKLAHAMA 11. HUDSON PRODUCTS, TULSA 12. NUOVO PIGNONE, ITALY (now GE OIL & GAS) 13. INDUSTRIAL HEAT TRANSFER INC. WI USA 14. ENERQUIP LLC. WI USA 15. MASON MANUFACTURING LLC IL USA 16. HT INDUSTRIAL ON USA 17. FAMET, POLAND 18. ALZ GMBH DORSTEN GERMANY 19. CE-AIR UK LIMITED HYDE UK 20. OGE GROUP DUSSELDROF GERMANY

In-House Expertise

Concept International Business

Consulting Limited (CIBC)”, assisted

over 250 businesses from Europe and

North America to come and set-up

business in India the list apart from

many other large corporations

includes Harley Davidson-USA,

Callaway Golf-USA, Polaris Industries-

USA, Hitachi-Japan, Nautilus Fitness-

USA, bio Merieux –France and more…


Thank You


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